MIZUNO Corporation ミズノ株式会社

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ミズノ株式会社

22nd Quarter Financial Reportnd Quarter Financial Report

The 97th Period (Year ended March 31, 2010)The 97th Period (Year ended March 31, 2010)

This report includes forecasts based on our assumptions, outlook and plans for the future as of

November 12, 2009, which may substantially differ from the actual results due to risks and

uncertainties relating to the global economy, competitors' situations, changes in exchange rates, etc.

MIZUNO Corporation

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ContentsContents

Q2 FY09 Business Results

Progress of Current Business Tasks

Business Status for the Period

Regional Highlights

FY09–FY11 Medium-Term Plan

3/２２

Income StatementIncome StatementRevenues decreased due to shrinkage in golf product sales and also had a negative impact from exchange rate fluctuation. Net income declined despite reduction of fixed costs (ad expenses, etc.)

-17.2%2.42.9Ordinary profit

-34.0%2.23.4Operating profit

-31.8%0.91.3Net income (Loss)

-0.3P3.2%3.5%Ordinary profit ratio

-1.1P3.0%4.1%Operating profit ratio

-23.1%516.7A&P expenses

-4.5%9.810.3Salaries and bonus

-10.3%

-0.1P

28.7

37.9%

32.0

37.8%

SG&A expenses

SG&A expenses ratio

-1.2P40.7%41.9%Gross margin ratio

-12.6%31.035.5Gross margin

-10.1%76.284.7Revenues

Versus

2008

FY09-2Q

(6 months)

FY08-2Q

(6 months)(JPY billion)

132.71161.53JPY/1 EUR

150.26204.04JPY/1 GBP

95.29105.97JPY/1 USD

4/２２

Balance SheetBalance Sheet

Inventory reduction progressed in major consolidated companies.

This, along with the debt reduction, contributed to higher asset efficiency.

-0.38.48.7Investment in securities

-1.04.55.5Deferred tax assets

+1.010.69.6Short-term debt

-3.59.312.8Long-term debt

-5.775.981.6Net assets

-1.229.630.8Other liabilities

-3.749.553.2Total liabilities

-1.039.840.8Fixed assets

-4.523.528.0Inventories

-2.228.030.3Accounts receivable

+2.312.610.2Cash and cash equivalents

-9.4125.4134.8Total assets

+ / -September 30, 2009September 30, 2008(JPY billion)

5/２２

Q2 Accumulated Total Q2 Accumulated Total –– Outline of Business ResultsOutline of Business Results

Summary of financial results

Revenues JPY 76.2 billion −8.5 billion (−10.1%)Revenues JPY 76.2 billion −8.5 billion (−10.1%)

Operating profit JPY 2.2 billion −1.4 billion (−34.0%)Operating profit JPY 2.2 billion −1.4 billion (−34.0%)

Impact of exchange rate fluctuations −3.3 billion (−4.0%)

Increase/decrease excl. impact of exchange rate fluctuations −5.2 billion (−6.1%)

Sales of golf items ceased falling in Europe, though the decrease continued in the Americas and Japan.

Growth in footwear sales slowed due to a decline in average unit prices. Substantial sales decrease in China also

had a negative impact.

Due to the impact of decreased unit prices resulting from reduced inventory, etc., gross margin ratio fell 1.2% from the previous year.Due to the effect of cutbacks on fixed assets (advertising expenses, etc.), sales, general and administrative expenses maintained the previous year’s level.

Ordinary profit JPY 2.4 billion −0.5 billion (−17.2%)Ordinary profit JPY 2.4 billion −0.5 billion (−17.2%)

Net profit JPY 0.9 billion −0.4 billion (−31.8%)Net profit JPY 0.9 billion −0.4 billion (−31.8%)

Exchange rate losses from yen translation of European branch assets, etc. (Current term end: 144.07 JPY/GBP, 131.69 JPY/EUR; Previous term end: 140.521 JPY/GBP, 129.84 JPY/EUR)

Loss from write-downs of securities, etc. (0.17 billion yen) as extraordinary loss

Versus previous year

6/２２

FY09-2QFY08-2Q

58.9

56.7

6.5

5.3

12.6

9.7

6.6

4.4

Revenue Increase/Decrease Analysis Revenue Increase/Decrease Analysis –– by Regionby Region

Revenues by region without impact of exchange rates, and the impact of exchange rates

84.7

76.2

FY2008-2Q

FY2009-2Q

Europe-2.2 billion(96.2%)

-3.3 billion

-1.7 billion(86.7%)

+0.4 billion(106.5%)

Impact of

Exchange rate

-1.7 billion(73.8%)

Revenues o

f FY08-2

Q (6 m

onth

s)

Revenues o

f FY09-2

Q (6 m

onth

s)

Europe: -1.6

Americas: -1.2

Asia: -0.5Japan: Affected by decreased sales of golf items, decline of average

unit prices of footwear, etc.

Europe: Revenues decreased due to impact of exchange rate despite

growth in golf items, footwear and apparel

Americas: Affected by decreased sales of golf and baseball items

and decline in footwear unit prices

Asia/Aus:Sales decreased substantially partly due to receipt of distributed

stock resulting from elimination/consolidation of China stores*

(* Franchise stores switching to direct-control stores, etc.)

JapanIncl.export

Asia/Aus

Americas

(Unit: JPY billion)

JapanIncl.export

Europe Americas Asia/Aus

7/２２

FY09-2QFY08-2Q

21.3

20.4

17.4

15.1

16.1

14.4

15.0

11.8 14.5

14.9

Revenue Increase/Decrease Analysis Revenue Increase/Decrease Analysis –– by Productby Product

Increase/decrease in consolidated revenues by product, including impact of exchange rate

Others

-0.9 billion(95.8%) -2.3 billion

(86.3%)

-3.2 billion(78.7%)

-1.7 billion(89.3%)

-0.4 billion(97.5%)

Baseball Sporting footwear Golf Others

Apparel, footwearEurope: Marked a decrease due to impact of

exchange rates despite increase on a local currency basis.

Japan: Average unit prices fell.China:Sales decreased greatly.

Golf itemsEurope: Marked a decrease due to

impact of exchange rates though a steady level was maintained on a local currency basis.

Japan, Americas: Sales decreased, average unit prices declined.

(Unit: JPY billion)

84.7

Revenues o

f FY08-2

Q (6 m

onth

s)

76.2

Revenues o

f FY09-2

Q (6 m

onth

s)

Sporting Apparel

Sporting Footwear

Golf goods

incl. shoes, wear

Baseball goods

incl. shoes, wear

FY2009-2Q

FY2008-2Q

Sporting apparel

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Major Financial IndexesMajor Financial Indexes

Efforts to improve efficiency (Defense) in the shrinking phase including asset reduction have achieved specific results.

Tasks now include setting up growth strategies (Attack) to create high added value (explained in later pages).

-0.050.710.76Price book-value ratio (PBR)

-¥45.97¥608.09¥654.06Book-value per share (BPS)

-¥431¥496Price at the end of this period

+21.1P66.8%45.7%Dividend payout ratio

-¥3.47¥7.48¥10.95Earnings per share (EPS)

-60.4%60.4%Shareholder’s equity ratio

-0.5P1.2%1.7%Return on equity (ROE)

-0.7P1.9%2.6%Return on Asset (ROA)

+ / -FY09-2QFY08-2Q

9/２２

Current Business Tasks 1/3Current Business Tasks 1/3

Progress in golf business reforms

Market trends

Player population leveling off

Unit sales prices declining

Replacement cycles getting longer

Continue efforts to improve

functionality.

Procure high-performance

products at low prices.

Review costs in design stage.

Strengthen sales of irons.

Enhance Custom Fitting.

Increase business efficiency.

Cut costs.

Reduce inventory.

Reduce SKUs.

Establish Global Golf Planning & Development

Center (July 2009).

Integrate all processes from development to just

before mass production.

Focus on development of global models.

Strengthen Custom Fitting worldwide.

Europe & US: Introduce new fitting systems.

Japan: Launch Custom Fitting approach in

cooperation with large-scale golf retailers.

Status of cost-cutting/inventory reductions (based

on internal management data)

Expenses (consolidated): 82%, year-on-year

Inventory amount (consolidated): 80%, year-on-

year

Golf will be an Olympic event in 2016.

Expectation is rising toward invigorating golf as a

competitive sport.

10/２２


Tasks in Chinese market development and future actions

Market trends

Chinese domestic brands' share is expanding.

Market continues with excess inventory.

Uncertain whether player population will increase.

For the time being, put more emphasis

on securing profits by improving gross

margin ratio and cost cuts, rather than

expanding sales.

Implement thorough inventory control.

Improve operational efficiency of existing

stores.

Reduce sales, general and administrative

expenses.

Seek higher functionality.

Differentiate from local brands.

Establish a brand image as the "brand

loved by players."

Responses to excess inventory

Disposal of accumulated inventory from

previous period is completed.

Compared year-on-year.

“Scrap & Build” stores

End of December 2008: 903 stores

End of June 2009: 731 stores

　　(Stores: New: 34, Closed: 206)

Marketing activities

Start trial sale of "BIO GEAR," high-

functional underwear series.

Hold trial hitting events in various

locations mainly for forged irons.

Hold badminton competitions in major

cities.

11/２２


Return to proper inventory levels.

26.828.5 28.0 27.5

23.5

3.13.2

3.0

2.8

3.0

0

5

10

15

20

25

30

07/9E 08/3E 08/9E 09/3E 09/9E

2.6

2.7

2.8

2.9

3.0

3.1

3.2

3.3

Ending Balance Inventory turns

Early disposal of accumulated stock

Enhancement of purchasing control

Cut JPY 4.5 billion from year-on-year

total.Improvement of gross margin ratio is

expected from Q3 FY09.

Inventory Turns: Net Sales / Ave.(Beginning balance

+ Ending Balance of Inventory)

FY08-Sep Delta FY09-Sep

Japan 18.0 -1.5 16.5

Europe 1.5 -0.4 1.1

Americas 4.8 -1.3 3.5

Asia/Aus 4.6 -1.0 3.6

Adj. -0.9 -0.2 -1.1

Total 28.0 -4.5 23.5

Inventory

(JPY billion)

Inventory

Turns

12/２２

Business Status for the Period Business Status for the Period ––Technology/Product DevelopmentTechnology/Product Development

To become a brand that continues creating added value, backed by high product development capacity

[Design] Soccer shoes: Dual functions available for both spinning

and non-spinning kicks.

"Wave Ignitus MD“ -Improved control realized by a unique material, Bio control panel.

　　　Golf clubs: 45 trajectory patterns realized.

"MP-630“ –

2 movable weights combined to enable easy

setting of the best trajectory.

[Materials] Artificial shuttlecock: aerodynamic structure + durability

"NS300" - Shuttlecock made with artificial feathers to increase durability

[Technology] Soft iron forging technology: realized incomparable hitting feeling

"MP Series Iron“ -

researched relation between hitting feeling and “sound” at hitting

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Business Status for the Period Business Status for the Period ––Technology/Product DevelopmentTechnology/Product Development

To become a brand that continues creating added value, backed by high product development capacity

[Evolution] Mizuno MP Series golf balls: quality performance for professional use

"MP 801" & "MP 801X" - long distance and improved controlby Mizuno’s original “cross core” technology and new outside coating material

[Comfort] 30% higher heat retention: heat generating material + heat reflecting material"Mizuno BREATH THERMO DOWN x REFLECTION GEAR Lightweight Jacket" 　

[Health] New products that take advantage of our R&D capacity

"Bio Gear Shisei Navi" - well-balanced standing position

"PuShutto“ - Pelvic exercise cushion

[Environment] Environment-conscious products: “Mister Donut Shop” uniform

"Semi-permanently recyclable“ - Teijin's polyester recycle system

"Mizuno's original DF cutting structure“ - Cutting technique enabling

smooth moves

14/２２

Business Status for the Period Business Status for the Period –– MarketingMarketing

Mizuno Victory Clinic, a grassroots sales promotion strategy

Training workshops with instruction by major players for junior/amateur players

- For various sports

– Soccer, walking, track-and-field, baseball, softball, etc.

- Development of fans through enhancement of gatherings with users

– Use of advisory staff and corporate players' networks

– "Promotion of sports," Mizuno's strength and origin

- 278 workshops were held between April and September 2009 (164 workshops in the same period of the previous year)

– Plans to hold 470 workshops annually

Running Marketing 　Offer test ride opportunities to allow customers to actually feel the performance and comfort

- US: Run With US Campaign

- Europe: Measure Up Campaign

- Japan: “Running Comfort Provision Base”

15/２２

Regional HighlightsRegional Highlights

Global Business Unit (global strategic decision-making unit)Q2 FY09 Sales outline (growth rate year-on-year) based on local currency without currency translation influence

EuropeEuropeJapanJapan AmericasAmericas Asia/AustraliaAsia/Australia

■ Sports apparel

■ Sports footwear■ Others

■ Golf products■ Others

Increasing more than 5%

-5% through 5%

Decreasing more than 5%

■ Baseball products■ Racket Sports, Judo

and others

■Wellness, Walking

■ Swimming■ Others

Footwear & Apparel

Business

Golf Business

Diamond Business

Wellness Business

16/２２

Regional Highlights Regional Highlights –– JapanJapan

Summary of resultsFY09-Q2 Results

Footwear & apparel business: Despite

increased footwear sales, greatly affected

by decline in unit sales price

Golf business: Responded to shrinking

market through cost cutting and inventory

reduction

Wellness business: Sales of walking

shoes leveled off

Exports: Exports to Korea were stagnant

Future actions/outlookDiamond sports business: Full-scale

launch of new brand (Global Elite)

Golf business: Continue enhancement of

iron sales through cooperation with large-

scale golf retailers on Custom Fitting.

Exports: Exports to Korea are likely to

recover.

(Unit: JPY billion)

(incl. Export to Asia)

57.0 57.660.5 58.9 56.7

2.2 2.02.6

2.0 2.2

0

20

40

60

80

FY05 FY06 FY07 FY08 FY09

0

2

4

6

8

10

Revenues

(JPY billion)

Revenues

Operating profit

Operating Profit

(JPY billion)

Note: Results by business are based on

in-house controlled data.

FY09-Q2 (6 months) Results by business

(For the wellness business, due to internal organizational changes, figures obtained were derived by adjusting sales figures for the same period of the previous year.)

-

5.3

Others

97%

8.8

Wellness

82%

7.6

Golf

100%95%96%vs FY08

21.513.556.7Revenues

DiamondFootwear

& ApparelTotal

17/２２

Regional Highlights Regional Highlights –– EuropeEurope

Summary of results FY09-Q2 ResultsOverall: Sales without currency translation influence exceeded those of previous year. Purchasing costs increased due to strong USD and weak GBP.

Footwear & apparel business:Recognition of high-function running shoes stabilized in the market, resulting in sales increase.

Golf business: Marked good results in British and Scandinavian markets thanks to fine reputation for new products.

Future actions/outlookFootwear & apparel business: Make effective use of Mizuno Running Series and introduce equipment for trial rides, with the aim of further sales expansion.

Golf business: Introduce new fitting system to strengthen sales of irons.

78%84%82%vs FY08

100%109%107%Currency

neutral basis

1.63.85.3Revenues

GolfFootwear

& ApparelTotal

4.4

5.4

6.6 6.6

5.3

0.24 0.30

0.500.58

0.19

0

1

2

3

4

5

6

7

8


0.0

0.5

1.0

1.5

2.0




(Unit: JPY billion)

Revenues

(JPY billion)

Revenues

Operating profit

Operating Profit

(JPY billion)

18/２２

Regional Highlights Regional Highlights –– AmericasAmericas

Summary of results FY09-Q2 ResultsFootwear & apparel business: Revenues decreased slightly from previous year due to impact of decline in unit sales price, etc.

Diamond sports business: Revenues were lower than previous year because purchasing was limited by the supplier side.

Golf business: Shrinking trend in the iron market continued, causing stagnant sales. Gross margin ratio declined due to disposal of accumulated inventory.

Other: Costs for starting new distribution warehouse increased.

Future actions/outlookFootwear & apparel business: Continue grassroots sales promotion activities such as Run With US campaign, to increase recognition for our brands.

Promotion event for Breath Thermo products in Vancouver is planned.

Golf business: Return inventory levels to normal. Aim to improve sales/gross margin ratio by launching new products and introducing new fitting system.

63%80%86%77%vs FY08

71%90%97%87%Currency

neutral basis

2.23.93.69.7Revenues

GolfDiamondFootwear

& ApparelTotal

9.7

12.613.5

12.7

9.7

0.49

0.82

0.52 0.49

-0.02-2

0

2

4

6

8

10

12

14

FY05 FY06 FY07 FY08 FY09 -0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4




(Unit: JPY billion)

Revenues

(JPY billion)

Revenues

Operating profit

Operating Profit

(JPY billion)

19/２２

Regional Highlights Regional Highlights –– Asia, Australia (excl. exports from Japan)

Summary of results FY09-Q2 ResultsChina: Sales unit price and gross margin ratio dropped due to early inventory reduction.

Taiwan: Both sales and profits exceeded those of previous year.

Production: Production management fees decreased along with inventory reduction at sales companies.

Future actions/outlookChina: Promote inventory reduction as planned. From next fiscal year, focus on improving gross margin ratio instead of expanding scale, to recover performance.

Australia: From FY10, start sales of various sports items including mainly running shoes, in addition to golf items.

Production: Implement China + One production base policy, to reduce manufacturing costs and diversify risks.

87%88%66%67%vs FY08

95%106%73%74%Currency

neutral basis

8.02.03.44.4Revenues

GolfDiamondFootwear &

ApparelTotal

4.0

5.0

6.36.6

4.4

0.500.64 0.68

0.42

0.04

0

2

4

6

8


0.0

0.5

1.0

1.5

2.0




(Unit: JPY billion)

Revenues

(JPY billion)

Revenues

Operating profit

Operating Profit

(JPY billion)

20/２２

FY09FY09––FY11 MediumFY11 Medium--Term PlanTerm Plan

Revenues/Ordinary profits

160.0 166.0174.0

162.0172.0

4.5 5.0

7.4

1.5

6.0

0

50

100

150

FY07 FY08 FY09 Forecast FY10 Plan FY10 Plan

0

5

10

15

Ordinary Profit

(JPY billion)

Revenues

Ordinary profits

Medium-term plan released in May

2009

Revenues

(JPY billion)

JPY-1USD 117.82 103.68 100 Planned Rate for FY09

JPY-1GBP 229.27 175.25 150 (using the same rate for FY10-FY11)

JPY-1EUR 161.86 144.40 135

21/２２

FY09FY09––FY11 MediumFY11 Medium--Term PlanTerm Plan

Revenue breakdown

Revenues

(JPY billion)

Note: Revenues in Europe include some exports

from Japan to Europe.

17.9 16.8 17.3 17.6 18.0

37.4

29.325.1 26.1 27.5

49.5 48.6 49.1 50.3 51.456.5 55.2 56.0

59.061.7

0

10

20

30

40

50

60

70

FY07 FY08 FY09

Forecast

FY10 Plan FY11 Plan

Wellness Golf Diamond Footwear&Apparel

26.1 22.5 21.1 22.0 23.0

13.311.1 10.9 11.6 12.4

12.9

11.49.6

10.912.0

6.1

5.44.3

4.85.4

0

10

20

30

40

50

60

70

FY07 FY08 FY09

Forecast

FY10 Plan FY11 Plan

Americas Europe Asia/AUS Asia(Export)

33.6%31.1%

28.7%29.7%

30.7%58.4

50.445.9

49.352.8

By businessBy business Non-Japan revenues

(ratio of non-Japan revenues)

Non-Japan revenues

(ratio of non-Japan revenues)

Medium-term plan released in May

2009

Revenues

(JPY billion)

22/２２

ClosingClosing

Company Policies for Fiscal 2009

Be Flexible and Push Through

Be Creative and Unique

Take Action with Guts

Attack & DefendUnder our business slogan for fiscal 2009, "Attack & Defend," we devoted

all our efforts to defensive actions in the first half of this year. For the

latter half of the year, though the market is still in a sluggish trend, we will

take aggressive actions for growth (attack) by launching attractive

products and implementing Mizuno's characteristic marketing activities.

MIZUNO Corporation ミズノ株式会社

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